You asked what Connecticut law requires regarding automobile insurance, is it a no-fault system, and how no-fault insurance works.

SUMMARY

Under current state law, anyone who wants to receive or retain a driver's license or motor vehicle registration in Connecticut must provide and continuously maintain a minimum amount of financial security (e.g., insurance), including liability coverage and uninsured and underinsured motorist coverage.

Liability insurance covers bodily injury to other people and damage to the property of others caused by a driver's negligence. The law requires a minimum of $20,000 per person and $40,000 per accident for bodily injury liability and $10,000 per accident for property damage liability.

Uninsured and underinsured motorist coverage covers bodily injury to the vehicle owner (“owner”), relatives living with the owner, and passengers injured in an accident caused by (1) an uninsured motorist, (2) a motorist whose bodily injury liability limits are less than the owner's uninsured and underinsured motorist coverage limits, or (3) a hit-and-run driver. The standard coverage is an amount equal to a policy's bodily injury liability coverage, but an owner may purchase additional coverage up to double the bodily injury liability. The law requires a minimum amount of $20,000 per person and $40,000 per accident.

The term “no-fault automobile insurance” is often used to refer to automobile insurance that permits a person to recover financial losses from his or her own insurance company regardless of who caused the loss (i.e., no-fault first-party benefits or personal injury protection). But this is an oversimplification. In the strictest sense, a no-fault insurance program is one that both (1) provides payment of no-fault first party benefits and (2) restricts the right to sue by establishing an injury severity threshold that, if not met, prohibits a person from suing for damages.

Before January 1, 1994, Connecticut had a no-fault insurance law that required private passenger motor vehicle owners to purchase a basic reparations coverage benefit of $5,000. The benefit paid medical expenses and lost wages incurred due to an injury sustained in an automobile accident without regard to who was at fault. In exchange for this benefit, the no-fault law restricted an innocent accident victim's right to sue the person who was at fault.

Public Act 93-297 repealed the no-fault insurance law. As a result, basic reparations coverage is no longer required. Instead, a person injured in an automobile accident because of another's negligent operation of a private passenger motor vehicle can seek compensation for their injuries from the at-fault driver and, if necessary, initiate a personal injury lawsuit to determine fault and the amount of damages to be awarded. Under the terms of a standard automobile insurance policy, an insurer has a duty to defend an insured person and a right to recover any payments it makes to an insured from those at fault.

As of July 2008, 12 states have no-fault insurance laws, according to the Insurance Information Institute: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah.

Enclosed are two reports from the Insurance Information Institute: No-Fault Auto Insurance (July 2008) and Compulsory Auto/Uninsured Motorists (August 2008). These may be accessed through the institute's website at www.iii.org under “select an issue.” The institute is a non-lobbying group that provides analysis and education on insurance topics. Its board is made up of representatives of the insurance industry.

MANDATORY INSURANCE REQUIREMENT

Under Connecticut law, the owner of a private passenger motor vehicle required to be registered in the state must provide and continuously maintain throughout the registration period financial security in accordance with CGS §§ 38a-334 to 38a-343.

The owner of a private passenger motor vehicle not required to be registered in Connecticut must maintain financial security that satisfies state law continuously throughout the period of the vehicle's operation, maintenance, or use within Connecticut (CGS § 38a-371).

Private Passenger Motor Vehicle Defined for Insurance Purposes

Under the motor vehicle insurance law, “private passenger motor vehicle” excludes a motorcycle or motor vehicle used as a public or livery conveyance (CGS § 38a-363(e)). But it includes a:

1. private passenger-type automobile;

2. station wagon-type automobile;

3. camper-type motor vehicle;

4. high-mileage-type motor vehicle;

5. truck-type motor vehicle with a load capacity of 1,500 pounds or less, registered as a passenger motor vehicle or passenger and commercial (combination) motor vehicle, or used for farming purposes; and

6. vehicle with a commercial registration.

Insurance or Self-Insurance

The financial security the law requires may be provided through an insurance policy or self-insurance (CGS § 38a-371). Specifically, a person may satisfy the financial security requirement by purchasing an insurance policy complying with state law and issued by or on behalf of an insurer licensed to transact business in the state. If the vehicle is registered in another state, the policy must be issued by or on behalf of an insurer licensed in either this state or the state in which the vehicle is registered.

Alternatively, a person may self-insure, subject to the insurance commissioner's approval. To seek the commissioner's approval, a vehicle owner must provide the commissioner evidence:

1. of his or her, or other appropriate person's, continuing undertaking to perform all obligations imposed by the law;

2. that appropriate provision exists for the prompt and efficient administration of all claims, benefits, and obligations provided under the law; and

3. that reliable financial arrangements, deposits, or commitments exist providing assurance for payment of all obligations the law imposes substantially equivalent to those afforded under an insurance policy complying with the law.

Minimum Amount of Liability Coverage Required

A motor vehicle insurance policy must include liability coverage of at least:

1. $20,000 for injury to or death of a person,

2. $40,000 for injury to or death of more than one person in any accident, and

3. $10,000 for property damage (CGS §§ 38a-335 and 14-112(a)).

With respect to the insured motor vehicle, the coverage under the bodily injury liability and property damage liability provisions apply to the named insured and relatives residing in his or her household unless specifically excluded by an endorsement (CGS § 38a-335(d)).

Mandatory Uninsured and Underinsured Motorist Coverage

Each automobile insurance policy must provide “uninsured and underinsured motorist coverage” for the protection of people insured under the policy who are legally entitled to recover damages because of bodily injury, including death, from owners or operators of (1) uninsured and underinsured motor vehicles and (2) insured motor vehicles, the insurer of which becomes insolvent before paying damages (CGS § 38a-336). For the purposes of this law, an “underinsured motor vehicle” is a motor vehicle for which the total of liability limits under all bodily injury liability bonds and insurance policies in effect at the time of the accident

is less than the applicable liability limits under the uninsured motorist portion of the policy against which a claim is made. (“Underinsured” has a different meaning for a related, optional benefit described below.)

By law, an insurer does not have to provide uninsured and underinsured motorist coverage to:

1. a named insured or relatives residing in his or her household when occupying, or struck as a pedestrian by, an uninsured or underinsured motor vehicle or a motorcycle that is owned by the named insured or

2. any insured person occupying an uninsured or underinsured motor vehicle or motorcycle that he or she owns.

Coverage Amounts Required. Each insurer must provide uninsured and underinsured motorist coverage with bodily injury and death limits equal to the liability coverage limits the insured purchased, unless the insured requests in writing a lesser amount, but at least $20,000 for injury or death of one person and $40,000 if more than one person in any accident. Each insurer must offer limits up to twice the bodily injury liability limit the insured purchased (CGS § 38a-336(a)).

Informed Consent. A person purchasing uninsured and underinsured motorist coverage amounts that are less than the policy's liability coverage amounts must sign an informed consent form that contains:

1. an explanation of uninsured and underinsured motorist insurance that the insurance commissioner approved;

2. a list of uninsured and underinsured motorist coverage options available from the insurer;

3. the premium cost for each of the coverage options; and

4. a statement in 12-point type that states:

When you sign this form, you are choosing a reduced premium, but you are also choosing not to purchase certain valuable coverage which protects you and your family. If you are uncertain about how this decision will affect you, you should get advice from your insurance agent or another qualified adviser.

A person's selection of uninsured and underinsured motorist coverage applies to all subsequent coverage renewals and to all policies or endorsements that extend, change, supersede, or replace an existing policy issued to the named insured, unless a named insured changes the selection in writing (CGS § 38a-336(a)).

Stacking Policies Prohibited. The law prohibits the “stacking” of benefits when a policy covers two or more vehicles or a person owns two or more vehicles covered under separate policies. Regardless of the number of policies issued, vehicles or premiums shown on a policy, premiums paid, people covered, vehicles involved in an accident, or claims made, the limit of liability for uninsured and underinsured motorist coverage that applies to two or more motor vehicles covered under the same or separate policies are prohibited from being added together to determine the liability coverage limit available to people injured in an accident (CGS § 38a-336(d)).

Total Amount of Recovery. By law, an insurance company must pay up to the limits of the policy's uninsured and underinsured motorist coverage after the liability coverage limits under all bodily injury liability bonds or insurance policies applicable at the time of the accident have been exhausted. The total amount of recovery from all policies, including any amount recovered under the insured's uninsured and underinsured motorist coverage, cannot exceed the limits of the insured's uninsured and underinsured motorist coverage. The law prohibits a reduction of uninsured or underinsured motorist coverage for amounts received by the insured for Social Security disability benefits paid or payable. This limitation on the total amount of recovery from all policies does not apply to underinsured motorist conversion coverage (CGS § 38a-336(b)).

Primary, Secondary, and Excess Coverage. If a person insured for uninsured and underinsured motorist coverage is an occupant of a vehicle he or she does not own that is covered by a policy providing the same coverage, then the policy covering the vehicle provides primary coverage, the policy covering the person as a named insured provides secondary coverage, and all other applicable policies provide excess coverage. The total amount of uninsured and underinsured motorist coverage recoverable is limited to the highest amount allowed under the primary policy, secondary policy, or any one of the excess policies.

If a person insured for uninsured and underinsured motorist coverage is an occupant of a vehicle he or she owns, the uninsured and underinsured motorist coverage under the policy covering the vehicle occupied at the time of the accident is the only uninsured and underinsured motorist coverage available (CGS § 38a-336(d)).

Optional Underinsured Motorist Conversion Coverage

The law requires insurers to offer, for an additional premium, an “underinsured motorist conversion coverage” benefit for the protection of insured people who are legally entitled to recover damages from owners or operators of underinsured motor vehicles (CGS 38a-336a). This benefit is in lieu of the underinsured motorist coverage described above. For purposes of this law, an “underinsured motor vehicle” is a motor vehicle with respect to which the sum of all payments received by, or on behalf of, the covered person from, or on behalf of, the at-fault driver are less than the covered person's fair, just, and reasonable damages.

Each insurer must pay up to the limits of the policy's underinsured motorist conversion coverage after the liability coverage limits under all bodily injury liability bonds or insurance policies applicable at the time of the accident have been exhausted. The underinsured motorist conversion coverage cannot be reduced by payments from any other source, including the at-fault driver's liability insurance.

For example, assume (1) a policy includes uninsured and underinsured coverage of $300,000, (2) the insured incurs $400,000 in personal injuries that another driver caused, and (3) the at-fault driver's policy includes $200,000 in bodily injury coverage. The insured collects $200,000 from the at-fault driver's insurer and turns to his or her own policy for additional coverage.

Without the optional underinsured conversion coverage, the insured's policy pays $100,000 (his or her policy limit of $300,000 is reduced by the $200,000 that the at-fault driver's insurer paid).

With the optional underinsured conversion coverage, the insured's policy pays the amount the insured remains out-of-pocket, up to the policy's limit. In this scenario, the insurer pays $200,000 (the amount of injuries, $400,000, minus the $200,000 from the at-fault driver's insurer).

Optional Comprehensive Glass Coverage

Each automobile insurance policy providing comprehensive coverage, whether designated as such or included in a policy providing broader coverage, must include, at the option of the insured, complete coverage for repair or replacement of all damaged safety glass without regard to any deductible or minimum amount (CGS § 38a-339).

Notice Regarding Coverage for Rented Vehicle

Each automobile insurance policy that covers a private passenger motor vehicle must contain, or have attached, a conspicuous statement specifying whether the policy provides liability, collision, or comprehensive coverage for damage to a rented private passenger motor vehicle. If the policy provides coverage, the statement must include the coverage limit and whether any deductible amount applies (CGS § 38a-335(b)).

RELATED PENALTIES

Operating a Vehicle without Insurance (CGS § 14-213b)

The owner of a private passenger motor vehicle or vehicle with a combination or commercial registration that is registered or required to be registered in Connecticut is prohibited from operating or permitting the operation of the vehicle without maintaining the insurance required by law. Failure of the vehicle operator to produce an insurance identification card constitutes prima facie evidence that the owner has not maintained the required insurance.

A person who violates this statute is subject to a fine of $100 to $1,000. However, an owner of a vehicle with a commercial registration who knowingly operates or permits the operation of the vehicle without the required insurance is guilty of a class D felony (a fine of up to $5,000, imprisonment up to five years, or both).

In addition, the law requires the Department of Motor Vehicle (DMV) to suspend the vehicle owner's registration and driver's license for one month for a first conviction and six months for subsequent convictions. The DMV is prohibited from restoring a person's license until he or she has provided evidence of having the required insurance for each motor vehicle registered in his or her name. A person whose license and registration have been suspended must also pay a $250 restoration fee before DMV will restore the license and registration (CGS § 14-50b).

Failing to Maintain Insurance (CGS § 38a-371)

The owner of a private passenger motor vehicle required to be registered in Connecticut who operates it or permits it to be operated without maintaining the insurance required by law is guilty of a class C misdemeanor (a fine of up to $500, imprisonment up to three months, or both).

Failing to Carry Proof of Insurance or Registration (CGS § 14-13)

A vehicle owner must carry a vehicle's automobile insurance identification card and registration in the vehicle at all times. The first offense is an infraction subject to a $35 fine. A subsequent offense is subject to a fine up to $50. (Because a subsequent offense is not an infraction, a court appearance is required.)

Insurers notify DMV monthly of automobile insurance policies cancelled in the preceding month (CGS § 38a-343). If DMV determines that the owner of a registered vehicle is not maintaining the required insurance, the law requires the DMV commissioner to issue the owner a notice of registration suspension.

If the owner does not contest the determination, he or she enters into a consent agreement with DMV, procures the necessary insurance, and pays a civil penalty of $200 in lieu of the registration suspension. If, 30 days after the registration suspension, the owner has not entered a consent agreement, cancelled the registration, or transferred ownership of the vehicle, DMV may suspend the owner's driver license.

Public Act 08-150, § 42, (effective July 1, 2008) allows the commissioner to decline issuing a registration suspension notice if the vehicle registration is cancelled or he cannot establish that the violation occurred for a period of more than 14 days.

Vehicle Impound for Suspended Registration (CGS 14-12h)

DMV maintains a record of all registrations suspended for failure to maintain insurance and makes the information, including related license plate numbers, available to the police. If a police officer observes an uninsured vehicle that has a suspended registration being operated on a public highway or parked in a parking area, the officer may confiscate the license plates and impound the vehicle. The vehicle owner cannot regain possession of the vehicle until he or she has paid a $50 confiscation fee. Any vehicle that is impounded for more than 45 days is subject to forfeiture to the state.

NO-FAULT AUTOMOBILE INSURANCE

The term “no-fault automobile insurance” is often used to refer to automobile insurance that permits a person to recover financial losses from his or her own insurance company regardless of who caused the loss (i.e., no-fault first-party benefits, also known as personal injury protection (PIP)). But this is an oversimplification. In the strictest sense, a no-fault insurance program is one that both (1) provides payment of no-fault first party benefits and (2) restricts the right to sue by establishing an injury severity threshold that, if not met, prohibits a person from suing for damages. The thresholds may be expressed in verbal (e.g., an injury description) or monetary (e.g., dollar amount of medical expenses) terms.

According to the Insurance Information Institute, (1) high threshold systems tend to reduce costs and delays in paying claims since they restrict or reduce litigation and (2) verbal thresholds minimize the incentive to inflate or overstate claims trying to reach a “target” dollar amount. The institute notes that (1) the verbal thresholds have been eroded over time in some states by broad judicial interpretations of the statutory language and (2) PIP coverage has been abused by fraudulent doctors and clinics billing for unnecessary care.

Connecticut

Before January 1, 1994, Connecticut had a no-fault insurance law that required private passenger motor vehicle owners to purchase a basic reparations coverage benefit of $5,000. The benefit paid medical expenses and lost wages incurred due to an injury sustained in an automobile accident without regard to who was at fault. In exchange for this benefit, the no-fault law restricted an innocent accident victim's right to sue the person who was at fault.

Under the no-fault law, an accident victim was prohibited from suing the at-fault driver unless he or she:

1. incurred over $400 in medical expenses,

2. suffered permanent injury,

3. fractured a bone,

4. suffered permanent significant disfigurement,

5. suffered permanent loss of bodily function,

6. suffered loss of body member, or

7. died.

Public Act 93-297 repealed Connecticut's no-fault insurance law, which the Insurance Information Institute describes as having been “comparatively ineffective” because of the low monetary threshold. As a result, basic reparations coverage is no longer required in automobile insurance policies. A person injured in an automobile accident because of another's negligent operation of a private passenger motor vehicle can seek compensation for their injuries from the at-fault driver and, if necessary, initiate a personal injury lawsuit to determine fault and the amount of damages to be awarded. And under standard automobile insurance policy terms, an insurer has a duty to defend an insured person and a right to recover any payments it makes to an insured from those at fault.

According to the Connecticut Insurance Department, some insurers offer basic reparations or medical payments coverage as an optional benefit in place of the formerly mandatory coverage. It provides for medical payments and, in some cases, lost wages and funeral expenses if an insured or a relative living with him or her is injured or killed in an automobile accident.

The 1993 act established an optional alternative dispute resolution program, which may or may not include binding arbitration, for parties to lawsuits arising out of automobile accidents (CGS § 52-195b). It also required Superior Court judges to establish an expedited claims procedure for cases in which the plaintiff limits his or her claim to no more than $75,000 and both parties to the lawsuit agree to use the procedure (CGS § 51-15).

Other States

As of July 2008, 12 states have no-fault insurance laws, according to the Insurance Information Institute. Five have verbal thresholds: Florida, Michigan, New Jersey, New York, and Pennsylvania. The other seven—Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah—have monetary thresholds.

In addition, New Jersey, Kentucky, and Pennsylvania have a “choice” no-fault system. These states offer motor vehicle owners a choice between the lawsuit threshold and retaining the right to sue for injuries sustained in an automobile accident.

Colorado, Georgia, and Nevada once had no-fault insurance laws that were repealed, or allowed to expire, in 2003, 1991, and 1980, respectively.